CIL might not get right to captive miners’ excess coal

The policy on surplus coal, expected to be announced next month, is likely to bypass Coal India Ltd (CIL) and allow captive miners to transfer surplus coal from specified end-use plants to other plants operated by the same company.

Earlier, the policy had proposed CIL assume the role of a ‘coal banker’ (surplus coal from captive mines would be transferred to the state miner, with a rider on future obligations). However, CIL objected to the obligation clause, as well as the pricing formula.

Currently, the Coal Mines (Nationalisation) Act, 1973, mandates in case of captive mining, all coal mined from a block must be used entirely for the end-use project specified in the allocation letter.

The proposed policy on the usage of surplus coal from captive mines, aimed at reducing India’s dependence on imported coal, has been under consideration for years. Earlier, it was found there were cases in which though some captive mines were ready, the end-use plants weren’t.

In its draft policy on surplus coal usage, the Planning Commission had initially proposed excess coal mined by private firms from captive blocks be sent to CIL. Officials said the proposal to use CIL as a ‘coal banker’ hit a roadblock, with the miner opposing the future supply obligation. Also, there was dispute over the pricing formula through which CIL was to buy the excess coal. Initially, it was proposed CIL would buy the coal at its notified price. But both CIL, as well as the coal ministry, opposed this, saying the price included margins, too, and CIL couldn’t be asked to pay such rates to private mine owners.

“CIL has reservations against its role as banker. In such a scenario, the only viable option is to permit captive coal block miners to transfer excess coal to another plant operated by the same company, which might not have a coal linkage or an operational mine,” said a source privy to the development. However, captive miners will not be allowed to sell to other steel, cement or power projects.

“It means now, the block will be allocated to the company, against allocation to a specified plant earlier,” the source added.

Earlier, several private companies had sought the government’s permission to use their excess coal for other projects. Last year, Tata Power, the country’s largest private electricity generator, had sought government approval to use surplus coal from its Mandakini captive mine in Odisha for the 1,050-Mw Maithon project in Jharkhand, which was recording a shortage of coal. The plea was made because the Mandakini mine was scheduled to start production before the associated end-use plant, the 660-Mw Naraj Marthapur project, came up.

The coal surplus policy, which the government has said is to be finalised by next month, might allow such diversion of surplus coal by captive miners.

RED HOT AS EVER

What is ‘coal banker’?: Surplus coal from captive mines would be transferred to the state miner, with a rider on future obligations

What the law says?: The Coal Mines (Nationalisation) Act, 1973, mandates in case of captive mining, all coal mined from a block must be used entirely for the end-use project specified in the allocation letter

The Plan panel proposal: Initially it had proposed that excess coal mined by private firms from captive blocks be sent to CIL

Roadblocks: The proposal to use CIL as a ‘coal banker’ was hit when the miner opposed the future supply obligation. Also, there was dispute over the pricing formula through which CIL was to buy the excess coal

Proposed solution: It was proposed CIL would buy the coal at its notified price.

Reaction from CIL and coal ministry: Both opposed the move, saying the price included margins, too, and CIL couldn’t be asked to pay such rates to private mine owners